Case In Point

An Employer’s ESA Obligation During Notice Period Where Employees Cannot Work During That Period

Case In Point

An Employer’s ESA Obligation During Notice Period Where Employees Cannot Work During That Period

Date: May 29, 2013

Arbitrator Randy Levinson recently found that an employer complied with the provisions of the Employment Standards Act, 2000 (“ESA”) by providing written notice of termination, rather than termination pay, to two employees who could not work during the termination notice period due to disability.

The case involved the termination of two employees who were on an approved medical leave and unable to work as a result of disability. While on medical leave, the employees continued to be on the employer’s benefit plan and maintained their seniority in accordance with the provisions of the collective agreement. Upon termination, the employer provided the employees with written notice of termination in accordance with the ESA, but did not provide the employees with any pay during the notice period. Instead, it continued the employees’ benefit coverage under the collective agreement and maintained their seniority during the statutory notice period. The employer also provided the employees with severance pay in accordance with the ESA.

The union grieved the employer’s decision, arguing that the employees were entitled to receive the wages they would have received had they not been on sick leave during the notice period. It based its argument on the wording of subsection 60(1)(b) which states:

60.(1) During a notice period under section 57 or 58, the employer…

(b) shall in each week pay the employee the wages the employee is entitled to receive, which in no case shall be less than his or her regular wages for a regular work week;…

In the union’s view, the “wages the employee is entitled to receive” under subsection 60(1)(b) included termination pay under the ESA.

The employer argued that the requirement to pay the “wages the employee is entitled to receive” under subsection 60(1)(b) only required the employer to pay to the employees those wages they were entitled to under the contract of employment (which, in this case, was the collective agreement). In the present case, the collective agreement did not contemplate the payment of wages while the employees were not at work but only required the maintenance of benefits and seniority. Accordingly, the employer argued that it had “met its statutory obligations by maintaining the status quo by continuing the grievors’ benefit coverage during the statutory notice period, which was due under the collective agreement.”

Arbitrator Levinson agreed with the employer’s argument and dismissed the grievances. In coming to this conclusion, he held that the ESA only required the employer to pay the wages the employees were entitled to under the collective agreement during the statutory notice period. Since the employees were not working, they had no entitlement to pay.

Arbitrator Levinson specifically rejected the union’s argument that the requirement to pay the “wages the employee is entitled to receive” during the statutory notice period included a requirement to pay termination pay in accordance with the ESA. In doing so, he relied on the definition of “regular wages” under section 1 of the ESA, which specifically excludes termination pay. This definition of “regular wages” was a significant change from the definition in prior versions of the legislation. Thus, the arbitrator was able to distinguish prior case law where termination pay was found to be owing in similar circumstances.

The union also asserted that the non-payment of termination pay to disabled employees was discriminatory under the Human Rights Code because it excluded the disabled employees from a benefit bestowed upon able-bodied employees. Arbitrator Levinson rejected this argument, relying on the 1999 decision of the Ontario Court of Appeal, Ontario Nurses’ Association v. Orillia Soldiers Memorial Hospital et al which held that requiring work in exchange for compensation was a reasonable bona fide occupational requirement.

Arbitrator Levinson’s decision is significant in terms of an employer’s obligations when terminating an employee who is absent from work on a leave of absence. It confirms the view that an employer can satisfy its requirements under the ESA by providing an absent employee with notice of termination and maintaining the same pay (which can be zero pay if the employee is not at work) and any benefits that the employee is entitled to receive while on that leave of absence.